New Bill Would Ban Mandatory Arbitration for Sexual Harassment Claims

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A bipartisan bill was introduced in the U.S. Senate that would make it illegal for businesses to enforce mandatory arbitration agreements for sexual harassment and sex discrimination claims. But employment attorneys told
SHRM Online that meaningful changes need to start with corporate culture.

Employers commonly have new hires sign agreements to arbitrate any disputes that may arise during the employment relationship. Courts have generally enforced such agreements if they allow employees to exercise their legal rights and aren't too one-sided in favor of the employer.

The Ending Forced Arbitration of Sexual Harassment Act, introduced Dec. 6, would invalidate those agreements as they relate to sex discrimination claims. Senators Kirsten Gillibrand, D-N.Y., and Lindsey Graham, R-S.C., who co-sponsored the bill, said it would protect victims who are prevented from discussing their cases or taking them to trial.

"This legislation takes off the table the ability of employers to mandate arbitration before claims even arise," Graham said in a press statement.

"When a company has a forced arbitration policy, it means that if a worker is sexually harassed or sexually assaulted in the workplace, they are not allowed to go to court over it; instead, they have to go into a secret meeting with their employer and try to work out some kind of deal that really only protects the predator," Gillibrand said.

This legislation will further incentivize employers to make sure they have strong anti-harassment policies in place, are taking swift action to resolve complaints and are doling out appropriate consequences, said Melanie Pate, an attorney with Lewis Roca Rothgerber Christie in Phoenix.

She cautioned that the bill may have the unintended consequence of pushing these claims into confidential settlement agreements earlier. But it could also give victims more leverage to negotiate in the early stages, she added.

She noted that claims that go to arbitration aren't always a secret. For one thing, many aggrieved employees file a very detailed complaint about the allegations in court first, she said. The employer will then ask the court to compel arbitration—but the complaint doesn't disappear if the case is sent to an arbitrator.

Executive Agreements

Employers need to address sexual harassment long before the issue reaches the courthouse or an arbitrator, Helms said.

Prevention and resolution are key. Therefore, some businesses may consider revising their executive agreements' morality clauses in response to the wave of sexual harassment claims involving top executives and politicians.

A morality clause is a provision in
an employment contract that prohibits certain behavior or sets moral expectations. Most executive agreements have definitions of "cause" for termination and include broad prohibitions on misconduct, Pate explained.

As those clauses are drafted, they may need to more explicitly state that sexual harassment allegations would fall under the morality clause so that there's no question, Helms said. "But it can get messy.
What behavior violates the agreement? Is a consensual affair a violation?"

Pate suggested that the clause state that an executive can be terminated if the employer determines its own policies or federal or state anti-discrimination laws have been violated.

Specifically calling out sexual harassment in addition to broader prohibitions in the executive agreement makes it a lot more difficult for the employer and the executive to ignore or try to rationalize any conduct that should result in termination, she said.

Company Culture

Employers should focus on corporate culture, harassment prevention and training, Pate said. "It can't be just lip service—employers need to take meaningful, proactive steps to address misconduct and prevent any issues from happening again."

Businesses need to have a strong code of conduct for all employees that covers sexual misconduct and other unacceptable behavior, Helms noted. But she cautioned that it's not enough just to have the code; employers need to enforceit. "If the behavior is truly not allowed or tolerated, and employees know they will lose their job or other opportunities, that's what's really going to stop the behavior."

Getting support from the company's leaders is critical. "CEOs need to buy in to the idea that they have to train all employees and make it clear that they have zero tolerance for this type of behavior in the workplace," Pate said. "Now is an opportune time for HR professionals to approach the CEO and say that they want to make sure the company is taking a proactive approach."

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Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.